RBI panel meet gets underway, change in policy rate unlikely

In its August meeting, the MPC had unanimously kept the repo rate unchanged at 5.5 percent. The RBI in its February and April meetings cut the repo rate by 25 basis points each, followed by a 50 basis points cut in June.

Economists anticipate that the committee is unlikely to make changes in the repo rate. According to ICRA, the MPC is anticipated to maintain the status quo on repo rate in its October review due to the positive impact of GST reforms on demand, stronger-than-expected Q1 GDP growth and an inflation trajectory that, while lowered due to GST rationalisation, is expected to slop upwards thereafter.

Aditi Nayar, Chief Economist, ICRA Ltd, said, “In ICRA’s view, the GST rationalisation could dampen the headline CPI prints by 25-50 bps during Q3 FY2026-Q2 FY2027 relative to our pre-GST rationalisation estimates, taking the average for FY2026 to approximately 2.6%. While October and November may mark a fresh low for the CPI inflation, the trajectory subsequently remains upward sloping.”

Economists at Goldman Sachs anticipated that the MPC would keep policy repo rate unchanged and maintain the “neutral” stance, but deliver a dovish guidance, taking stock of growth conditions, while awaiting fuller transmission of the 100 basis points easing delivered so far.

“In our baseline scenario, we expect another 25bp rate cut in December, taking the repo rate to 5.25%, supported by our benign inflation view, our US economists’ more dovish Fed outlook relative to market pricing, and our FX strategy team’s expectation of renewed US dollar weakness,” Goldman Sachs report said.

However, a report by the State Bank of India suggested that a 25-basis-point rate cut could be the most suitable option, given that inflation remains under control and the economic outlook indicates further moderation.